A-5

James A. Bent

Chief Schedule Engineer

Mobil Research and Development Corporation

Engineering Department

h P. 0. Box 1026

1 Princeton, New Jersey 08540

SCHEDULING AND CONTROLLING CONSTRUCTION SUB-CONTRACTS

INTRODUCTION Due to project size, a furtner consideration

is dividing large scopes of work on an area or
The subcontracting of construction instead functional basis. Area breakdowns are usually
of the normal direct hire basis has signifi- more efficient as they provide for a single
cantly increased over the past five years in the responsibility but this requires that sub-
U.S.A. Owners have welcomed this move, but contractors have necessary skills and experience
are concerned at the lack of appropriate con- to handle multiple types of work. One of the
trol techniques, methods and systems. Major earliest subcontract strategy decisions is in
contractors have failed to realize that many the civil work. Should earth work, concrete
of their direct hire techniques are not suitable foundations, underground piping be combined
for a multiple subcontract operation. Apart from on an area basis with a single subcontractor
good contractual documents and agreements, or should there be three subcontractors each
there are two basic elements for effective con- handling tne work on a total job basis? Careful
trol of subcontracts. First, adequately assess consideration of subcontractors capability,
a comprehensive scope and maintain control single responsibility and interface coordina-
documents and records which accurately reflect tion requirements must be made for an efficient
work in progress, contract changes and operation.
estimated final cost. The second, monitor and
measure the performance of the subcontractor. Another element of subcontracting is the
This papaer will demonstrate proven control question of direct materials as a free issue
methods and simple, but effective, techniques item or supply by the subcontractor.
for measuring subcontract performance.
All these variables can affect the ability
The paper is organized as follows: to schedule and control, and often the con-
tractor control system must be modified to fit
1. Subcontract Stategy - contracting the subcontracting strategy for an effective
basis - area or functional break- operation.
down of large subcontracts -
single responsibility - subcon- The contractors subcontract organization
tract organization. is, sometimes, of concern to owners. Where
2. Subcontract Preparation - bid subcontracts is the responsibility of the
package - scope - schedule - procurement department, necessary input and
control specification. coordination with the construction personnel
3. Progress Control - Typical controls is often lacking. Similarly, when subcontracts
and reports. is an engineering function the involvement
4. Measurement - Physical quantities - of procurement and construction is too little
field takeoffs. or too late. Sufficient, to say, that all
5. Cost Control - Typical controls/reports - elements of engineering design, purchasing
performance evaluation. procedures, labor, and site conditions must
form part of subcontract packages.
This paper is directed to cost and schedule
engineers, and to members and prospective mem-
bers of project teams charged with performing There must also be personnel, experienced
today's challenging super-projects. in engineering, business matters and construc-
tion to negotiate subcontracts in the home
office and then follow the work to the jobsite.
SUBCONTRACT STRATEGY Continuity of personnel from home office to
jobsite is important for a successful subcon-
Business considerations, project size and tract operation. It is essential that engineer-
schedule requirements determine, to a large ing, procurement and construction personnel
extent, the breakdown of construction work into be properly involved in bid reviews, negotia-
lump sum, unit price or cost plus subcontracts. tions and final bid tabulation.
21
SUBCONTRACT PREPARATION For effective execution, unit price sub-
contracts require high-quality bid packages in
Detailed attention by qualified personnel which contractual conditions and work unit
in the formation of subcontract packages at descriptions are clearly defined. Time and
the very earliest moment is a wise expenditure expertise are required to put these together.
of time. Too foten, lack of attention or
a slipping engineering schedule results in sub- Exhibit A - Subcontract Preparation Schedule
contracts being awarded with serious business
and control discrepancies. The following pre- Exhibit A, Subcontract Preparation Schedule
paration is essential: shows the significant activities and durations
for a major subcontract on a large project up
1. Adequate scope definition. to and including contract award. The time
2. Business-like contractual conditions. requirements shown are based on many years of
3. Accurate labor regulations experience. An overall schedule for all major
and site conditions. subcontracts, based on this standard, should
4. Specific control and reporting be produced as early as is possible. The
requirements. "Subcontract Preparation Schedule" can be
effective in letting and controlling sub-
The above require considerable effort and contracts in a business-like, orderly fashion,
experience to make up into quality subcontract with due regard to their criticality. At
packages. Owners have experienced serious contract award this schedule completes its
schedule slippages due to contractors failing work and the control responsibility is then
to recognize the work effort and time required. vested in the field construction staff.

Project schedules frequently require that An important item of the subcontract

subcontract be let on a unit price basis. This package is a "Control Specification" which
is a compromise between lump sum subcontracts, details required control and reporting pro-
which require full engineering definition; and cedures. It is important that subcontractors
reimbursable subcontracts, which sometimes are fully understand the requirements of this
entered into with almost no definition. specification so as to provide money and

EXHIBIT A
personnel in their proposal to do the work. and reporting. 'Therefore, to achieve a success-
Contractors and owners have often experienced ful operation, it is essential to keep control
difficulty in having subcontractors properly documents as simple as is possible, without
respond to control and reporting requirements. being excessively time consuming. Physical
Even with this approach of fully detailing progress must be measured by physical quanti-
control and reporting requirements, prior to ties; manhours must be collected to check on
contract award, actual subcontractor performance productivity or forecast manpower requirements;
rarely meets specification. What is promised work in progress needs to be accurately
and what is achieved are often not the same. identified; scope changes must be promptly re-
However, failure to pursue this approach often cognized; labor availability needs to be
results in intolerable situations where periodic constantly evaluated, particularly in remote
measuring of subcontract performance varies jobsites or areas with high concentrations of
widely in accuracy. work.

Exhibit B - Control Specification The key element in measuring progress,

evaluating manpower requirements and predicting
Exhibit B, Control Specification outlines completion is the accuracy of the scope in
the measurement requirements for quantities, quantities and manhours. So often, the overall
manhours, manpower, equipment, lost time, and progress chart looks like the profile of a
reporting frequency. Requirements for small mountain range as the actual progress line
projects would be less demanding. One of the increases and decreases with time, due to
objectives of this specification is to have upgrading of a poor scope evaluation. On large
subcontractors do eht reporting and avoid Qi-ejects, wnere small scope variations can be
situations where contractors and/or owners significant, quantity takeoffs from construc-
have to carry out this function. tion issue drawings are essential.
CONTROL SPECIFKATION
(Large Projects) The following exhibits are typical control
Subcontracroron awardof contract is required techniques.
to prepare follo"ing documentsto monimr progress.
tixhibit C - Subcontract Progress Report

This tankage subcontract report breaks

down the major operations, on a financial
weighted basis. The individual activities are
scheduled and an overall planned completion
1.3 Report actual quanrities by
curve drawn based on the manhours and weighted
total job. basis. Physical completion of the activities
is measured and manhours recorded, which pro-
vides for an evaluation of progress, manhour
1.5 Predict final quantities.
expenditure and productivity. All that is
missing is the actual and planned manpower
2. Manhours Every week
levels.
2.1 Total by geographical area

2.2 By craft by EoLal job. Exhibit D - Subcontract Status Report

3. Manpower
This report shows actual progress, perfor-
3.1 By craft by total job. mance and manpower against planned or his-
4. Equipment (noise study torical experience. This is an excellent tool
5. Planning and Scheduling
for correlating the three variables and pre-
dicting the requirements for a specific com-
5.1 All derail and overall schedules pletion or completion based on current trend.
The expected performance (productivity for
direct hire labor) is based on historical
experience; early poor results are due to
5.4 Appropriate quantity progress C”r”eS
initial learning experience and work on
and reports. temporary facilities but performance quickly
5.5 Progress curve by cotal ,ob. improves as proportion of direct work increases.
The curve will then flatten out due to
5.6 Manpower loading curve by fotal jab.
weight of work accomplished and gradually re-
Daily duce due to tail-end punch list and check out
holiday, weather, industrial disputes, etc.
work.
All above reports (with exception of daily ones) to be issued 4 days after
cut-off date.
Exhibit E - Quantity Progress Report
Note: Progress curves can be developed on a financial basis and/or “weighted
manhour” basis.
This report shows quantities of mass exca-
EXHIBIT B vation and fill for a large grass roots site.
The original scope evaluation is scheduled
and actual field progress plotted. It is
PROGRESS CONTROL interesting to note that on this example the
scope evaluation increased by 20-30 percent.
Subcontractors rarely have the capability Also the actual progress shows a schedule
of sophisticated planning, scheduling, control, slippage of 9 months.
23
 SUBCONTRACT PROGRESS REPORT

contract: Subcontractor:- Description:- Week Ending:

PERFORMANCE SCHEDULE
VALUE WEIGHT ly WEIGHT TARGET EARNED
Activity ($1000: I* COIPL. %co*. WiHRs . MWRS.
MOBILIZATIOI! N .A . -3.5 InO 3.5 j,4On 3,400 - e(
H.A. 32 1:. 0 P,960 2,A70 - 4 #@
BOTTOcl PLATE 2.4
AYIULAR :'ZLD H.A. 2.4 1,370 -90
XT COURSE N.A. 5.8 12 0.7 4,460 .53n - ,*
2ND COURSE H.A. 7.1 7,040 c -80
3RD COURSE H.A. 5.9 h,r)TO
bTH COURSE I7.A. 5. 1 5,920
5x1 COURSS H.A. 4.3 5,92C =-4f -70
hT!I COURSE 1J.A. 3.3 s,fi4o
7TH COURSE H.6. r
_. 5,540 . -40
8TII COURSZ N.A. 2. 5,F;40 #
9TI! couRsc ?.A. 2.2 5,540
lOTI! COURS, "- A ,
Ll. 1.7 5,763
ROOF H.A. 32. i 26,140
TES'X:IG I!.A. 1. . 9 5 ,\'OO
PAIH~I'IC W. A . 5.7 26,200
DEMOBILIZATIOF 1J.A. 1.5 ? ,OOC
30

-20

-10

Total Value I .lr,!r Comments:

Total Value Percent Complete 8.2 Two tanks only indicated on
Total Target Manhours 132.000 this sheet
Total Earned Manhours To Date CT.??00
Manhours Percent Complete 5.1
Total Manhours To Dote 7.020
Manhours Performance To Date 1.n-2
Trend Manhours 1% .4,79
EXHIBIT C

This is an efficient visual tool for group in the field to adequately measure
scope trending and evaluating schedule per- and evaluate progress. Field measurement can
formance, can be used for many categories of be greatly facilitated when home office
work, particularly the "bulks". (Also good quantity takeoffs are included on the specific
for engineering; concrete drawings, piping drawings at construction issue. It is then
isometrics and structural steel.) a relatively simple matter in the field, as the
work is completed, to use these quantities for
An additional technique would be to payment and measurement of progress together
collate the craft direct manhours to the with addition of field drawings changes as
quantity and evaluate performance on a unit construction proceeds.
manhour basis. This also provides his-
torical experience for estimating or operat- To overcome this home office lack of
ing evaluation of other similar projects. good quantity takeoffs, many contractors
have instituted a field quantity takeoff
system. As construction drawings are re-
MEASUREMENT ceived at the jobsite, cost engineers and
quantity surveyors will take off quantities
The key element in the measuring of and maintain a total scope buildup to com-
subcontracts is quantities. This is parti- pletion of engineering. This does provide
cularly true not only for unit price sub- for a proper assessment of scope, but it does
contracts but also for lump sum subcontracts mean that overall construction progress
which need to be evaluated for progress on cannot be fully evaluated until these field
a quantity basis. takeoffs are completed. This takes time and
often the project is many months into con-
Many contractors do not carry out quantity struction before overall progress can be
takeoffs during the engineering pnase as drawings accurately measured.
are completed for construction issue. This
can lead to a poor estimate of the scope and It is important that field measurement
can cause serious problems for the construction of work in progress be recorded properly on
24
 REPORT NO.
OUANTITY PROGRESS REPORT
PERIOD ENDING

EXHIBIT D

marked up drawings or quantity lists so that EXHIBIT E

financial billing of the subcontractor can
be adequately checked. It is necessary that
the subcontractor's billing be constantly the previously stated commitments by the
checked to insure that his billing does contractor to the subcontractor can be main-
reflect the work completed. tained during the execution of the subcontract.
It is particularly important that a review
At subcontract award or prior to start of schedule commitments of associated inter-
of construction, mutual discussions and agree- face work by others, jobsite areas, free-issue
ments with subcontractor on methods of pro- material supplies, and services be made as
gress measurement can greatly assist in an these items often provide major claims by
efficient field subcontract operation. At subcontractors.
these meetings, agreements should be made for
the weighted breakdown on lump sum subcon- A log should be maintained of all engineer-
tracts and agreements for measuring part ing and contractual changes that have taken
completion of unit prices. The frequency and place to tne contractual documents forming part
reporting of measurement is a worthwhile item of the agreement with the subcontractor. All
for agreement at this early date. changes should be evaluated for potential cost
and appropriate cost trends recorded of such
changes. These potential cost deviations
COST CONTROL should be estimated as definitively as possible
for use in future negotiations with the sub-
The first step in cost control of subcon- contractor.
tracts is evaluation of the contractual do-
cuments and contract agreement. This evalua- The following exhibits are typical control
tion should look for contractual anomalies, techniques.
pricing discrepancies and contractor condi-
tions which might lead to cost exposure to Exhibit F - Civil Subcontract Evaluation (Unit
the prime contractor and, hence, the owner. Price Subcontract)
Careful consideration should be made of
schedule commitments and agreements, ware- The basic element of all unit price sub-
housing arrangements, lay down and material contracts, apart from contractual and schedule
handling requirements, and an evaluation that considerations, is quantities (supplied by the
25
engineering contractors). Experience, parti-
cularly of large projects, has shown that these
early quantities often change during the con-
struction phase. This is due to advancement
of engineering design and changes in field
conditions bringing improved estimate defini-
tions.

This evaluation should consider potential

variations in quantities against the pricing
structure submitted by subcontractor.

The attached exhibit shows the summary com-

mercial breakdown for a civil subcontract and,
as indicated, it would appear that subcontractor
A has a bid lower than subcontractor B, by
$150,000. The technical evaluation shows that
all variables are equal for both contractors,
0 1150
hence, the award of the subcontract is solely
a question of pricing. $ 07s 0

On several large projects, with different

contractors and subcontractors, owner experience
has shown that civil work is the one greatly
underestimated, particularly when it is necessary
to let the civil subcontract in the early design
phase to satisfy schedule requirements.
CI"u. Sl!"CO:iTRACT
F"AL"ATION
EXHIBIT G

components. The control sheet shows the price

of the original contract agreement and then
accumulates current experience and forecasts
future possibilities to a final predicted total
cost. The form is vertically divided into two
parts, the top portion being physical scope
of work and the bottom portion (items 6 to 10)
covering financial matters where the physical
scope of thework may not have increased. This
is to enable progress measurements to be made
5,000 on a financial basis of tne physical scope of
750 work.

It is necessary to break out costs of materials

to provide allowances for labor claims and con-
ditions which do not affect material prices.
The cost engineer must consider all items identified
on the form on a factual, contractual or poten-
EXHIBIT F tial basis. The definition of scope and con-
tractual conditions will largely determine the
makeup of thelisted items (items 1 to 7).
Exhibit G - Civil Contract Evaluation
tixhibit J - Subcontracts Forecast Summary
Takes the same subcontract commercial compari-
son and applies a typical sensitivity for in- All subcontracts entered on control form
creasing quantities and, as shown, the lowest (Exhibit H) are then listed, in total, on this
bidder is then subcontractor B by a substantial control form. This form summarizes the current
amount. As shown the earth works quantities are cost and forecasted final value of the sub-
the most volatile of all on a large grass roots contract and identifies scope, claims and
project. potential trends.

This sensitivity analysis of quantities Exhibit K - Performance Evaluation

should be carried out until the engineering
design is sufficiently advanced to have con- This is a technique to measure and monitor
fidence in the early estimate of these quanti- the financial performance against the manhours
ties. expended by the subcontractor. This will enable
evaluations to be made of potential schedule
Exhibit H - Subcontract Prediction Cost Summary slippage and financial claims where subcon-
tractor's performance may be causing financial
This control form is made out for each sub- difficulties. If a subcontractor is in finan-
contract and is broken into material and labor cial difficulty due to poor performance or due
26
 I I Ii I I
EXHIBIT -H
I TOTAL 59354 59354 j 7609 7609

27
 PERFORMANCE EVALUATION
to "buying" the work with a low bid, this can
lead to schedule and cost problems for the
entire project. For direct hire work measuring
labor productivity resolves this problem. PERFOFMANCE FACTOR - CONTRACT BILLINGS - $ PER M.H.
(LABOR) MANHOURS EXPENDED
Direct hire techniques cannot as readily be used
to measure subcontracts. When this performance
evaluation technique is properly used, it can
provide early warning of potential problems. ASSESS SUBC"NTR4CT"RS OPERATIONAL COST, BY BUILDING UP FIELD COSTS,
EQUIPMENT COSTS, OVERHEAD ETC. "NT" THE BASE LABOR COST.
This technique has been used on large and
small projects over the past ten years and has
successfully provided an early warning system = ALL-IN COST = $ PER H.H.
for cost exposure and schedule slippage. Early
warning provides time to evaluate actions
which might alleviate the subcontract situa-
tion or at least provide for minimum schedule . ENSURE THAT BILLINGS TRULY REPRESENT THE WORK ACCOMPLISHED.
slippage if cost adaition is inescapable.
. ENSURE T"AT MANHOUR REPORT IS ACCURATE.

Exhibit L - Subcontractor Performance . IF SUBCONTRACT HAS A MATERIAL SUPPLY, EVALUATE FOR PROFIT ON
MATERIAL TO ADD T" PROFIT/LOSS OF LABOR ELEMENT.
This is a simple tabulation of financial
performance per manhour of each subcontract.
In conjunction with the performance curve
shown on the subcontractor's status report EFFICIENCY = PERFORMANCE FACTOR
ALL-IN COST
(Exhibit D), this data can provide a good
basis for overall cost prediction.

Exhibit M - Procedure for Field Changes and IF TXE CUERTLATIVB EFFICIENCY IS LESS THAN 1.0 THE SUBCONTRACTOR
Extra Work IS IN A LABOR LOSS POSITION.

This exhibit outlines major elements to

efficiently evaluate, report and estimate THIS CAN LEAD TO SCHEDULE EXTENSION AND CLAIMS.
field changes and extra work which occur during
EXHIBIT K

SUBCONTRACTORS PERFORMANCE

5 Earnod hr Labor Manhour Spent

._) 'Me&. Erect, Onsites '

1 _ .- _--,PWws omtes
lBoi.lers
-------+-.. --- Jfeaters
'Heaters . .
- -- ---- +Civll @sites
-- -7 --~-
--- __f- ~-~ , CIVIJ OffSitiCS
--G - --. *-+ ,Spheres
!--- ----+-.. .~..._._ - 'Tank~e
.- _-_i -- ~_.~ .,Site Prep. ;.. .
~ - ---d ~. . ~_.. -iPiping Offaites I,
i:
1. ~~- ~___ .__ ,l4ech. Erect. Offsites : 1 1
~.Pil.iIlg , . ,
-A----- _ .Stacks
f.. II -- L-- -. ~-Control/Lab. Bld& 1 : 1 _.

--_----__--- -. _
-----~ -..
--a.-..- -.
-- i--. -~--._
.- .- .

. _.._.,_ Ir -+,-

, 4 i- sEXHIBIT L ..-_ ._ .
. . _. , __ j __ _ i ---._ - . .. i .I.~ -._ .~_ . .

28
 PlELD CHAIICES-SUB CONTF.ACTORS-PROCEDURE

(Extra work Authorization)

It is the primary responsibility of Sub-contracts Administration to

maintain performance of a sub-contractor so that all contractual commif-

merits, previously accepted, are achieved. Often times, however, these

contractual comitnents of scope, quality, schedule, cost, etc. change;

it is the intent of this procedure that work proceed in a timely, efficient

and orderly manner.

2. Reason for mange:
All such changes, whether initiated by contractor or owner, shall be

idenrified as "Field Changes." They shall be initiated, approved, trans-

mitted, and recorded in a" efficient manner designed co minimize the loss
3. mange Requested By:
of time and extra cases associated with each such change.

1. Field Change Order Form

Attached is a sample of this form, which becomes the main control

docunenc of all cha",qes. This farm is reasonably self-explanatory

and c,,vers all aspects of scope, cost, schedule and approval.

2. This farm, fully completed, together with sub-contractor's bid and

8. Effect on Schedule:
c""tract"r c"st estimate shall be submitted to owner Sub-contracts

Coordinator who will process it thr"ugb the requisite "tier sections.

3. only with rhe appropriate signature in the owner authorization box

nay this work proceed.

4. Field cban~es of costs less fha" $1,000 do "oC require Prior """e=

authorization, however, it is expected tbar the same documentation

and Procedure will prevail so that changes to A.F.C. dtawi"p,s and

specifications "ill have Owner engineering approval.

5. The Field Chance Order (FCO) should be submicced in duplicate so that construction. Attached to this written pro-
cedure is a sample of a field change order
one form may be retained by owner.
form which has been successfully used on
6. on completion of viork, FCO will be re-subnitted with items five (5) current projects.
and six (6) filled in and any supporting cost back-up should estimated
The objective of this provedure is to
and actual cost differ.
identify all changes from approved drawings,
7. -It is appreciared that possible urgency of tile proposed work- may not evaluate cost and schedule impact and then
give sufficient eime fnr a fornal bid to be solicited, so the "Esfimated
authorize the work.
Bare Cost" (item 4) will be a co"tracf"r "Guesstimate." Oftentimes, field changes and extra
8. Particular care should be give" to irem eight (8) - Affect on works are required on an urgent basis, how-
ever, an efficient estimating and authoriza-
Schedule - 50 that ProPer ns~essment may be made of the Proposed change.
tion procedure need not necessarily delay
9. -recommended that the_FCO "unberi"E sysfem be tied back- to the cost the work. Too often owners receive requests
schedule geographical area, and that the "umber indicate the "umber of on a crash basis where little thought has been
given to need or cost impact of this change.
changes in that area as well as the tocal "umber of cha"ges...i.e., if

a process unit - l/1/1. Should the change cover more than one unit or The intent of this paper on scheduling and
controlling construction subcontracts is to
area the" prefix "P" for ""sites and "S" for Offsites could be used.
present pragmatic control techniques and methods
for cost and schedule evaluations. Effective
control of subcontracts is demanding and
EXHIBIT M requires personnel experienced in business
matters, cost analysis and schedule evaluation.
The best techniques in the world will not insure
an efficient subcontract control operation un-
less qualified personnel are assigned to the
task.

29